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NFTs vs Bitcoin Ordinals: Why Elon Musk Believes in On-Chain JPEGs

Published November 2, 2023 5:17 PM
Josh Adams
Published November 2, 2023 5:17 PM
Key Takeaways
  • Bitcoin Ordinals were first conceived earlier this year.
  • In some ways, they are an upgrade to traditional NFTs.
  • Elon Musk certainly seems to agree.

Elon Musk recently made comments on The Joe Rogan Experience podcast mocking non-fungible tokens (NFTs) for not actually storing artwork on the blockchain. “The funny thing is the NFT is not even on the blockchain — it’s just a URL to the JPEG,” said Musk. 

While Musk was criticizing NFTs, his comments also highlighted the benefits of Bitcoin Ordinals, also known as Bitcoin NFTs.

The History

The Ordinals protocol  was created in January 2023 by Casey Rodarmor, after last year’s Taproot update enabled complex smart contracts on Bitcoin. There are approximately 37 million Ordinals inscriptions permanently etched on the Bitcoin blockchain, according to data from Dune 

The number of Bitcoin Ordinals soared  in early May, overwhelming the Bitcoin network. Daily inscriptions peaked at 400,000 on May 7 and 8, causing Bitcoin fees to skyrocket and the mempool to fill with pending transactions.

NFTs, on the other hand, were first conceived in 2014. It was their creation that first allowed for trading of digital art, collectibles, and gaming items as if they were as scarce as physical objects. As we know, since launching just years ago, NFTs have rapidly grown into a multi-billion dollar market and become a cultural phenomenon.

Although, it wasn’t until years later that they finally found their footing. By 2021, celebrities like Justin Bieber and Madonna were brandishing their Bored Apes, and it appeared everyone had an opinion on the notorious “expensive JPEGs”.

It wasn’t until January 19, 2022 that the market hit its peak , nearly eight years after their conception. 

Bitcoin Ordinals vs NFTs

In the interview released on October 31 with Rogan, Musk elaborated on his criticism of NFTs, stating: “You should at least encode the JPEG in the blockchain. If the company housing the image goes out of business, you don’t have the image anymore.”

Bitcoin Ordinals vs NFTs
Source: Dune

Criticism of NFTs by Musk isn’t new though. Back in December 2021, the South African-born entrepreneur posted a meme  to (what was then) Twitter to mock the digital asset. Some, including the creator of Bitcoin Ordinals, Casey Rodarmor , believes he has a point

Bitcoin Ordinals differ from traditional NFTs in a few key ways. NFTs on platforms like Ethereum often just store a link to off-chain artwork rather than encoding the actual artwork on the blockchain. Like Musk said, this means if the link goes dead, the NFT loses its associated artwork. No more NFT.

Digital Artifact, Not Bitcoin Ordinal

On the other hand, Bitcoin Ordinals encode artwork directly on the Bitcoin blockchain, ensuring it will exist as long as Bitcoin exists. For this reason, there is an argument that Ordinals are a purer reflection of the original vision of NFTs as irrevocable proof of ownership and provenance.

It’s for this reason that Rodarmor, their creator, prefers the term “digital artifact” , as opposed to Bitcoin NFTs.

Additionally, NFTs often have creator royalties embedded in smart contracts, allowing the artist to receive a percentage of resale value. Bitcoin Ordinals have no such royalties—at least not natively—since data cannot be altered once inscribed on Bitcoin. 

In the future, we may see a bifurcation of the non-fungibles market. One which appeals to the utility of NFTs, which allow for more complex and evolving features, and Bitcoin Ordinals. Rodarmor’s creations, or “digital artifacts” may yet become the NFTs we know now—digital collectibles with more staying power. Data inscribed on the blockchain, and not just linked to it.

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